White Paper

Productivity

2. Productivity

a. Global comparison

A 2017 OECD survey recommended a range of reforms to improve productivity in New Zealand, which remains well below leading OECD countries. These include reducing barriers to foreign direct investment, lowering the corporate tax rate, expanding infrastructure funding options to increase housing supply, reviewing the insolvency regime and provisions for misuse of market power, and increasing support for business innovation.

b. Industry statistics

This productivity precis notes that according to the Bureau of Labor Statistics, the average American works 8.8 hours every day. Yet a UK study of nearly 2,000 full-time office workers found that the average time spent working is two hours and 53 minutes each day, with workers also spending time using social media and reading news websites, making personal calls and texts, talking to co-workers about non-work-related matters, searching for new jobs, and taking smoke breaks and preparing food and drinks.

To the question, ‘Do you consider yourself to be productive throughout the entire working day?’, 79% of respondents said no, and 54% said the distractions made the working day ‘more bearable’.

Evidence of productivity benefits from reducing working hours is mounting. According to the UK-based New Economics Foundation, a “normal” working week of 21 hours could help address a “range of urgent, interlinked problems”, including “overwork, unemployment, over-consumption, high carbon emissions, low wellbeing, entrenched inequalities, and the lack of time to live sustainably, to care for each other, and simply to enjoy life”.

In 2014, the Swedish city of Gothenburg began trialling a six-hour work day for government employees, with some private businesses joining suit.

According to CNN, a number of forward-thinking companies in the US have implemented four-day work weeks, noting an improvement in staff morale, retention and quality of output.

One former World Bank policy expert told CNN two theories were key to his 20-hour work week: “Parkinson’s law”, that work expands to fill the time available, and the “80/20 Principle”, that says 80% of productivity is achieved in 20% of our time.

c. Effects of congestion

In 2017 the New Zealand Institute for Economic Research published a report on the benefits from Auckland road decongestion. The report was commissioned by the Employers and Manufacturers Association, Infrastructure New Zealand, Auckland International Airport Ltd, Ports of Auckland Ltd, and the National Road Carriers Association to identify the social and economic costs of traffic congestion to Auckland’s lifestyle and economy.

NZIER took a sophisticated model that can break down the impact per business sector and applied Auckland Transport’s latest 2016 traffic flow information to the problem that is increasingly rapidly strangling Auckland and its economy. The report received extensive news coverage and input from a number of commentators on its key findings:

Productivity in Auckland could be boosted by at least $1.3 billion per annum (1.4% of Auckland’s GDP) if use of the roading network could be optimised.

If the average speed across the Auckland network was close to or equal to the speed limit, which is also known as free-flow, NZIER estimates the benefits of decongestion during weekdays at around $3.5 million per day, or between $1.4 and $1.9 billion (between 1.5% and 2% of Auckland’s GDP).

Congestion in Auckland is well above comparable cities. The latest annual Traffic Index from GPS navigation company TomTom shows Auckland is now the 47th worst city in the world in terms of traffic congestion. Auckland’s congestion is above most cities with a similar population size (Perth, Brisbane, Adelaide) and is now comparable to much larger cities such as Melbourne and Sydney.

Auckland’s recent rapid population growth has stretched the capacity of the network. For example, it now takes 67 minutes to drive from Papakura to the CBD in the morning, up from 46 minutes in 2013 (AA, 2016). Congestion in Auckland has increased both at different times of the day and across more of the network, particularly during the interpeak (the middle of the day between the morning and late afternoon peak) when most freight trips are made. This is spreading congestion across the day.

Congestion is projected to get worse as the population keeps growing. Auckland Transport projected that more than a quarter of the arterial network would be congested by the end of 2017 – an increase from 18% at the end of 2014.

The funding organisations of the NZIER report were united in the view that there is a pressing case for decongestion measures to be introduced in Auckland now, not in the 6-10 year time frame currently being contemplated by both central and local government. All agreed the size of the productivity prize and liveability gains for Auckland and the scale of the problem demanded action.

The Employers and Manufacturers Association (EMA) CEO Kim Campbell said, “What business is telling us and what we’re seeing in the numbers is that congestion has worsened exponentially in the past three to five years. Our EMA members who took part in focus groups put the productivity loss in the 20-30% bracket, so what the above figures show is the average productivity loss across the entire population of Auckland.”

Infrastructure NZ CEO Stephen Selwood said the actual productivity gains may be even higher. “We know this estimate is conservative. The model only measures congestion on five of seven days and of course business is a seven-day a week operation. It also only values your leisure trips at less than half the value of work time, a value I’m sure many Aucklanders would agree undershoots the cost.”